Regional cafe: Banking for the underbanked

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Published: August 10, 2015 12:18:22 AM

Global Analytics is eyeing the Indian market because it has considerable mobile internet penetration, growing consumption which is fuelling demand for credit, and a large segment of population which has no access to credit

Global Analytics was founded in San Diego, California, in 2004 by Krishna Gopinathan. It is an award-winning provider of solutions using big data for the underbanked population globally. Global Analytics helps extend financial services to those who don’t have access to them. Gopinathan is a pioneer in real-time data analytics, and is one of the primary creators of the Falcon Fraud Detection system, which, to this day, has protected over 2 billion credit cards worldwide. The company has raised nearly $100 million since inception.

Gopinathan wanted to set up the back-office operations of Global Analytics in India. He chose Chennai over Bangalore because he was concerned about the high attrition rates of Bangalore. Chennai is a favoured destination for number-crunchers as it has a base of strong analytically-inclined institutions such as IIT Madras, the Institute of Mathematical Sciences and the Chennai Mathematical Institute.

To start with, Global Analytics was built as a KPO (knowledge process outsourcing), focused on solving some of the toughest challenges in credit risk and HR issues using advanced analytics. Although the KPO space in analytics continued to grow, Global Analytics realised that margins were getting squeezed while the real value of what they were doing was being captured by the clients. Given its strong expertise in credit scoring and fraud detection, Global Analytics decided to vertically integrate and become an online balance-sheet lender in the UK under the brand name Lending Stream. “Our core competency was in credit-risk assessment and scoring. We were building business models for lenders so that they know how much they should lend. Global Analytics had great credit scores and decided to use that. We became our own lenders,” says Mukund Venkatesh, vice-president & general manager of India at Global Analytics.

Lending Stream provides short-term unsecured loans through purely online and digital channels. Prospective customers can fill in their information at the Lending Stream website, and the system will make a decision to lend within seconds. It analyses thousands of complex data variables, affordability issues, credit scoring and behavioural algorithms. Money is delivered to the customer within minutes. “The UK market has grown rapidly since 2009,” says Venkatesh. “We are the fourth largest online lender in the UK.” Lending Stream issued its 1 millionth loan earlier this year.

Global Analytics acquired in 2014, which focuses on the American market. It has rebooted this venture through Zebit—an e-commerce payment system that allows the underbanked to buy products online through EMI with no interest and no fees. Zebit was launched in 2011 by Global Analytics. Through its Zebit brand, Global Analytics is the first end-to-end big data platform-as-a-service provider in the financial space. The platform harnesses the power of advanced analytics to deliver accurate risk assessments on a per-transaction basis. Global Analytics raised $25 million of venture funding for this in May 2012.

Zebit’s mission is “to help people buy things they want, when they want them, on terms that best suit their needs.” It helps businesses work with customers with low access to credit and enables them to make purchases using a single, customisable platform by using Adaptive Data Fusion. Venkatesh says that this is a win-win solution for both the underbanked and e-commerce merchants, given that most credit products are simply not available to the underbanked or come at a high cost.

Zebit, which has a revenue of about $100 million, typically lends to small entrepreneurs and salaried or part-time workers between the ages 25 and 50 with a salary of $40,000 to $50,000 a year. It is both a lender and acts as a platform for financial institutions and online merchants to help them decide who to lend to. The underbanked customer segment is a large and growing untapped market that offers significant growth potential for e-commerce merchants. It will enable the underbanked to buy products on websites such as Flipkart on EMI.

Can this work in India? According to a World Bank survey in April this year, there are 68 million underbanked in the US, 8 million in the UK, and 420 million in India. Venkatesh says that Global Analytics is considering the Indian market quite seriously. The country has a huge underserved market. Banks extend loans to those having Cibil (Credit Information Bureau Limited) credit score of above 750 points. “We can go beyond this. We have built up a huge database. This could be supplied to banks and NBFCs having digital presence,” he says. “We will be mining information from employment verification services, social and online behaviour.”

Venkatesh says Global Analytics is eyeing the Indian market with great interest for several reasons such as considerable mobile internet penetration, growing consumption which is fuelling demand for credit, and the large segments of population which has no access to credit. A lot of action will be centred in Chennai where 80% of its 400 employees work. “In product companies, more so than service companies, we live and die by the quality of the talent that we are able to bring in, train and retain. This is critical for companies such as Global Analytics which are competing globally in the fast-moving fintech landscape. It is encouraging to see other technology product companies from Chennai doing so well such as Zoho, Stayzilla, BankBazaar and Ramco.

If Global Analytics succeeds in entering the Indian market, it will be the first company to use big data to evaluate creditworthiness in India.

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